Morgan Keegan Details Could Come Soon

By Andy Meek

Regions Financial Corp. CEO Grayson Hall said during Regions’ second quarter earnings conference call Tuesday, July 26, that details would be forthcoming soon about the Memphis-based investment banking franchise Regions put on the auction block in June.

Hall said Tuesday he was not in a position to give specifics yet about the future of Morgan Keegan & Co. Inc., but Monday was reportedly an initial bid deadline for Regions to get offers for Morgan Keegan.

A source told the Reuters news service potential offers for Morgan Keegan – a corporate icon in Memphis that was founded in 1969 – could come from firms like Blackstone Group LP, Carlyle Group and Stifel Financial Corp. A locally led buyout of some kind is also rumored to be in the works.

Christopher Marinac, managing principal and director of research at FIG Partners LLC, agreed some kind of deal with a private equity and local ownership mix is a possibility but that an important factor is how much capital a sale would generate for the parent company. Regions would use that capital to help repay its $3.5 billion in Troubled Asset Relief Program funds.

Marinac also said his guess is that it would likely be clear by the end of the year what Regions intends to do with Morgan Keegan, even if an actual deal surrounding the Memphis investment bank is not completed by then.

Hall’s comments came during the conference call about Regions’ Q2 earnings, highlights of which included a $55 million quarterly profit compared to a $335 million loss during the same quarter one year ago.

During the call, Regions executives also said the banking company will consolidate about 40 branches through the end of this year, a move they said would have “minimal customer impact.”

About Morgan Keegan, Hall told analysts during the call that pursuing a strategic review of Morgan Keegan is the right approach. He reminded analysts that Regions announced in June it had enlisted Goldman Sachs & Co. to explore Morgan Keegan’s future at the same time word was announced of a roughly $200 million settlement between Morgan Keegan and multiple regulators in a civil fraud case.

“I think the settlement we were able to achieve … in regard to Morgan Keegan really provided an opportunity for us to look at that business more strategically and decide where we go,” Hall said. “It’s a very valuable franchise. (It’s been) part of the organization since 2001.”

Regions paid total consideration of $812 million for Morgan Keegan 10 years ago. That amount reflects a gross purchase price of $789 million, plus another $23 million in a retention bonus pool.

“Our preference is to sort of maintain some type of strategic alliance moving forward, but we continue to believe taking a strategic review is the right answer,” Hall said.

Morgan Keegan’s headquarters tower serves as a prominent fixture on the Downtown Memphis skyline. Over the course of its history, the company grew to become one of the top regional investment firms in the nation.

The Downtown Memphis Commission posted a note on its Facebook page earlier this week noting that Morgan Keegan employs about 900 Downtown workers and for decades “has been a major investor in the success of Downtown Memphis.”